General Agency: Broker and Salesperson The classic example of a general agency relationship is the

06 Law of Agency (3) Chapter 3: Classifications of Agency Flashcards

General Agency: Broker and SalespersonThe classic example of a general agency relationship is the relationship between a broker and a sponsored salesperson. And their general agency relationships can be

a little confusing.Principal: The broker is the principal of the

agent.Agent: The sponsored salesperson is the agent of

the broker.Role Explanation: The salesperson represents

the broker in their relationships with clients. The salesperson helps the broker fulfill their fiduciary duties to their clients. In this way, the salesperson is a general agent of the broker.General Agency: Scope of Authorized Activities Since New York's Article 12-A Real Property Law holds brokers responsible for the authorized brokerage acts of their sponsored agents, brokers should create policies and standards to properly train their agents and to clearly state which brokerage acts their agents are approved to perform.The brokerage acts for which a sponsored salesperson is approved are often referred to as a salesperson's scope of authorized activities.special agencya form of agency relationship in which agents are limited in scope and are only authorized to perform acts permitted by their principal (Broker-Client)The most common example of a special agency relationship is the relationship between a real estate broker and their clients.Brokers are authorized to act on behalf of their clients via listing agreements, buyer-broker agreements, etc. Through those agreements, clients grant their agents (brokers) the ability to perform specific acts.Listing their home on the MLSRepresenting their interests as a buyer at an open house general agencya form of agency relationship in which the principal is responsible for the acts of their agent as long as the agent is acting within the scope of their duties (Broker-Salesperson) universal agencya form of agency relationship in which agents have a very broad and general scope of power to act on behalf of the principal; often granted via a general power of attorney (Child-Parent) Types of Agency: Exception for Property ManagementBecause property management is an on-going duty with wide-ranging responsibility that a broker takes on for a principal (property owner client), it requires the parties to enter into a general agency agreement instead of the more limited special agency agreement that is typical of a

broker-client relationship.Special Agency = Limited AgencySpecial agency is the most limited type of agency relationship. For this reason, some refer to special agency

as limited agency instead.Recap: Special agency = limited

agency.

General Agency: Broker Responsible for Salesperson's

Actions

Whereas special agency is limited, general agency:Gives

agents more power ANDHolds the principal (broker) responsible for actions performed by their sponsored agentsIn a general agency relationship, the principal (broker) is responsible and beholden to their agent's (salesperson) actions. Brokers give sponsored agents the ability to perform general actions (like represent sellers) and are responsible for every sponsored salesperson's actions. If a salesperson poorly represents the interests of their clients, the broker is responsible for that agents' actions.universal agentan agent possessing a very broad and general scope of power to act on behalf of the principal; authority often granted via a general power of attorney power of attorneya legal instrument used to confer the right of one individual to act on behalf of another Special Agency = Non-BindingSince special agency relationships are limited, special agents are unable to make decisions that would bind or

obligate their principals.Example: When Seller Tim signed

a listing agreement with Broker Sally, he authorized Sally to list his house on MLS, negotiate with potential buyers, and host open houses at his residence on the weekends.Seller Tim did not, however, authorize Sally to make decisions that bind him. Broker Sally cannot accept an offer from a buyer on behalf of Tim. Tim still makes the decision to accept buyer offers.Three Agency Types: Special, General, and UniversalSpecial Agency (broker-client)General Agency (salesperson-broker)Universal Agency (child-parent as executor of will) Universal Agency: The Most Broad Type of Agency Universal agency is the most broad type of agency.Universal agency gives agents the power to act on behalf of the principal AND make decisions on behalf of the principal.Usually, universal agency is granted to an agent via a power of attorney, which is a legal instrument used to confer the right of one individual to act on behalf of another.Armed with a power of attorney, the agent has the actual power to sign legal documents on behalf of the principal.special agentan agent whose authority to act on behalf of the principal is limited to a specific act or objective Special Agency Note: Between the Broker and ClientYou may have noticed that when I defined the special agency relationship, I said a great example of special agency was the relationship between brokers and their clients.Agency is created on the broker level, not the salesperson level. So when a client signs a listing agreement with a salesperson, they are actually signing an

agency relationship with the salesperson's broker, not the

salesperson.Recap: In regard to a principal (seller, buyer,

tenant, landlord), the broker is a special agent.Because special agency is created at the broker level, this means that not only does the broker owe the client (principal) fiduciary duties, but ALL of that broker's sponsored agents owe that client fiduciary duties as well.Agency created at the broker level has several implications, such as:Commission: The commission rate is negotiated

between the principal and the brokerListings: If a

salesperson switches brokerages, their clients remain with their previously sponsoring broker as their agency

relationships were with that sponsoring broker.Example:

Broker Natalie sponsors 15 agents. One of her agents, Audrey, gets a seller to sign a listing agreement. Who owes that seller fiduciary duties? Well, because agency is created at the broker level, Natalie and ALL of her 15 sponsored agents owe the seller fiduciary duties.All for one and one for all!Universal Agency in Real EstateAlthough universal agency occurs very rarely in real estate, it can occur in certain situations. The most common occurrence of a universal agency relationship in real estate is when a principal is abroad and gives their agent the general power of attorney in order to allow the agent to